NZD/USD bears move in as central bank divergence drives

• NZD/USD bears are in the market as the US Dollar perks up. 
• The Fed is back in focus as central bank divergence drives the markets. 

NZD/USD is flat in the open in Asia after falling out of the sky this week from a high of 0.6200 and reaching a low of 0.6069 on Wednesday. The pair was sunk on the back of the movements in the Aussie following the inflation data.

Analysts at ANZ Bank explained, ''in the Kiwi’s case, 0.6080/85 support (23.6% Fibo of the April-June fall) hasn’t been solid, but it’s just above there as we write.''

''We thought AU CPI data would unleash volatility and it has, but the trouble is, it hasn’t really clarified the market’s view on whether the RBA will hike or not next week and that’s the next hurdle for the AUD, and by correlation the Kiwi.''

''We expect a hike, mostly because we don’t think inflation is falling quickly enough, but let’s see. NZ ANZBO data today will be watched closely, which may add some local flair to the Kiwi narrative, which remains very global,'' the analysts explained. 

Meanwhile, the US Dollar has perked up. Signs of economic resilience to higher borrowing costs wiped out the recent support from safety demand while the US Dollar makes traction as US data remain strong.  More US data will come out this weekend so far it has been an improvement on last weeks.

The latest data showed that US Consumer Confidence jumped to a nearly 1-1/2-year high in June, while business spending, durable goods orders and home sales held up in May.

As for sentiment around the Federal Reserve, the WIRP suggests a 25 bp hike is nearly priced in for September, with odds of a second 25 bp hike topping out near 10% for November. Analysts at Brown Brothers Harriman explained that the  PCE data on Friday may help solidify those odds, with headline expected at 3.8% YoY vs. 4.4% in April and core expected to remain steady at 4.7% YoY.